SHANGHAI, April 30 (Reuters) - The yuan hovered at a 2-month
high against an easing dollar on Friday, despite disappointing
data that showed Chinese factory activity growth slowed more
than expected in April.
The currency looked set for its fourth straight weekly gain,
the longest such winning streak since September.
Prior to the market opening, the People's Bank of China
(PBOC) set the midpoint rate at 6.4672 per dollar, 43
pips firmer than the previous fix of 6.4715 and the strongest
since March 3.
In the spot market, onshore yuan opened at 6.4690
per dollar and was changing hands at 6.4685 at midday, 35 pips
firmer than the previous late session close.
If the yuan finishes the late night session at the midday
level, it would have posted its fourth weekly gain in a row and
the first monthly rise in three.
Traders said trading was tepid before the long Labor Day
holiday, with many market participants already away for the
vacation, while most investors refrained from holding huge
positions for the five-day break to avoid volatility in global
markets.
China's financial markets will be closed from Saturday, and
trading will resume on May 6.
Onshore yuan swung in a tight range of about 60 pips, and
volume shrunk to $12.58 billion at midday, down
from a normal half-day volume of about $15 billion.
Several traders said the yuan was benefiting from a weaker
dollar, which skidded toward a fourth straight weekly decline
against a basket of major peers, as the Federal Reserve stuck to
its message of ultra-low interest rates for longer.
But the slight gain in the yuan on Friday morning was capped
by weaker-than-expected April manufacturing data.
"In contrast to the expected upbeat U.S. Q2 data, the
re-pricing of China-U.S. growth outlook this year will likely
keep the RMB rally in check," said Ken Cheung, chief Asian FX
strategist at Mizuho Bank in Hong Kong.
China's factory activity expanded at a slower pace and
missed forecasts as supply bottlenecks and rising costs weighed
on production and overseas demand lost momentum.
Separately, signs of tension in the onshore interbank market
also lent support for the yuan, with several key money rates
climbing to more than two-month highs due to month-end higher
cash demand.
The volume-weighted average rate of the benchmark overnight
repo traded in the interbank market hit 2.2909% on
Friday morning, the highest level since Feb. 18, while the
weighted average of seven-day tenor also rising to
the loftiest level since Feb. 9.
By midday, the global dollar index rose to 90.647
from the previous close of 90.62, while the offshore yuan
was trading at 6.464 per dollar.
The yuan market at 0400 GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.4672 6.4715 0.07%
Spot yuan 6.4685 6.472 0.05%
Divergence from 0.02%
midpoint*
Spot change YTD 0.92%
Spot change since 2005 27.95%
revaluation
Key indexes:
Item Current Previous Change
Thomson 96.83 96.8 0.0
Reuters/HKEX
CNH index
Dollar index 90.647 90.62 0.0
*Divergence of the dollar/yuan exchange rate. Negative number
indicates that spot yuan is trading stronger than the midpoint.
The People's Bank of China (PBOC) allows the exchange rate to
rise or fall 2% from official midpoint rate it sets each
morning.
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan 6.464 0.07%
*
Offshore 6.637 -2.56%
non-deliverable
forwards
**
*Premium for offshore spot over onshore
**Figure reflects difference from PBOC's official midpoint,
since non-deliverable forwards are settled against the midpoint.
.
(Reporting by Winni Zhou and Andrew Galbraith; Editing by Kim
Coghill)
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